Falling operational costs helped AT&T grow profit in Q1 despite a hefty hit to revenue attributed to the Covid-19 (coronavirus) pandemic, with executives ditching guidance for the remainder of the year.
The operator estimated the pandemic hit revenue to the tune of $605 million, primarily due to reduced advertising, wireless equipment and roaming sales. However, executives noted on an earnings call a steep year-on-year drop in operating expenses from $37.5 billion to $35.2 billion offset this hit.
Though revenue fell $2.1 billion to $42.7 billion, net income attributable to AT&T rose from $4 billion to $4.6 billion.
AT&T explained it withdrew its 2020 guidance because wide-ranging economic uncertainty made accurate forecasting impossible. However, CFO John Stephens said it expects to feel the full impact of the pandemic in Q2, and assumed domestic recovery would begin in the second half of the year.
CEO Randall Stephenson reassured investors AT&T will continue to invest in key growth areas during the crisis including 5G, broadband and its new HBO Max video streaming service. It will also continue to pay dividends and reduce debt.
John Stankey, president and COO, said the operator will also press ahead with cost-cutting initiatives. He noted efforts to streamline its field services, and retail and distribution operations are currently underway, expecting this to yield $1 billion in savings.
“If anything we see this as an opportunity to approach all our businesses differently and better align our work with how Covid has reshaped customer behaviours and the economy.”
Mobile segment revenue of $17.4 billion was flat: service sales grew 2.5 per cent to $14 billion, with equipment turnover down 8 per cent to $3.4 billion. Operating expenses of $11.6 billion were 3.7 per cent lower.
AT&T delivered 3.3 million net additions, driven primarily by IoT devices, compared with 2.7 million in Q1 2019. Post-paid phone gains of 163,000 more than doubled from 79,000.
In a separate press release, the operator stated it nearly doubled its low-band 5G coverage to 190 markets, with launches this week in 90 new markets across 30 states.
Stankey said on the earnings call it expects to achieve nationwide coverage around the middle of the year.